Question 1

Nominal GDP has risen faster than real GDP in the last decade because:

Accepted Answer

A) ​the price level has increased. 
B) ​the price level has decreased. 
C) ​the growth rate of productivity has accelerated. 
D) ​the volume of foreign trade has expanded sharply.

Question 2

If country A had a smaller underground economy than country B, and country A's citizens worked more hours per week than the citizens of country B, other things equal, then

Accepted Answer

A) ​GDP comparisons between the countries would overstate the economic welfare of country A compared to B. 
B) ​GDP comparisons between the countries would understate the economic welfare of country A compared to B. 
C) ​it is impossible to know which direction GDP comparisons between the countries would be biased as measures of the economic welfare of the two countries. 
D) ​it would not introduce any bias in using GDP to compare economic welfare between the countries.

Question 3

Which of the following is included in government purchases?

Accepted Answer

A) ​Government purchases of investment goods. 
B) ​Transfer payments. 
C) ​Government spending on services. 
D) ​both (a) and (c)

Question 4

Which of the following is false?

Accepted Answer

A) ​We do not have information on nonmarket transactions output that is reliable enough to include it in the GDP. 
B) ​The most important nonmarket transaction omitted from GDP are services provided directly in the home. 
C) ​The value that individuals place on leisure is omitted in calculating GDP. 
D) ​All goods and services exchanged in the current period are included in this year's GDP.

Question 5

Which of the following is subtracted from net national product to arrive at national income?

Accepted Answer

A) ​net income of foreigners 
B) ​depreciation 
C) ​indirect business taxes 
D) ​transfer payments

Question 6

If indirect business taxes and depreciation were added to the national income, we obtain:

Accepted Answer

A) ​Net National product. 
B) ​Gross National Product. 
C) ​Gross Domestic Product. 
D) ​Personal Income.

Question 7

Final goods or services used to compute GDP refer to:

Accepted Answer

A) ​the sum of all wages paid to laborers. 
B) ​the factors of production used to produce output. 
C) ​goods and services purchased by the ultimate users. 
D) ​the value of outstanding shares of stock of manufacturing firms.

Question 8

If nominal GDP increased from $5,000 billion in 2010 to $5,500 billion in 2011 and the GDP deflator increased from 130 to 140 over the same time period, what would the 2011 real GDP equal expressed in terms of 2010 dollars?

Accepted Answer

A) ​$4,643 billion 
B) ​$5,107 billion 
C) ​$5,385 billion 
D) ​$5,500 billion

Question 9

Nominal GDP will always equal real GDP:

Accepted Answer

A) ​if prices are declining. 
B) ​in the base year. 
C) ​if prices are increasing. 
D) ​if the economy's total production does not change.

Question 10

How do pollution and crime affect GDP?

Accepted Answer

The answer of How do pollution and crime affect GDP?...

Question 11

What is the importance of measuring per capita GDP?

Accepted Answer

The answer of What is the importance of measuring per...

Question 12

If real GDP decreased by 1% and nominal GDP increased by 2%, then output:

Accepted Answer

A) ​increased and the price level increased. 
B) ​increased and the price level decreased. 
C) ​decreased and the price level increased. 
D) ​decreased and the price level decreased.

Question 13

GDP is:

Accepted Answer

A) ​the value of all final goods and services produced domestically within a given period of time. 
B) ​the value of all final good and services produced anywhere in the world by a nation's firms within a given period of time. 
C) ​the value of all final goods and services produced by a government within a given period of time. 
D) ​the sum of all currency and coins in circulation.

Question 14

The services rendered by a special agent with the Federal Bureau of Investigation is included in which expenditure category of GDP?

Accepted Answer

A) ​consumption 
B) ​investment 
C) ​government purchases 
D) ​net exports

Question 15

Mistakenly adding the value of a good or service twice by counting the intermediate goods and services in GDP is known as:

Accepted Answer

A) ​value added. 
B) ​double counting. 
C) ​factor payments. 
D) ​net depreciation.

Question 16

For the economy as a whole:

Accepted Answer

A) ​income must equal expenditures. 
B) ​expenditures exceed income because of taxes. 
C) ​income exceeds expenditures because of saving. 
D) ​expenditures exceed income because of the government budget deficit.

Question 17

If nominal GDP rose by 10 percent and the price index increased from 100 to 105 in a given year, real GDP:

Accepted Answer

A) ​rose by 15 percent. 
B) ​rose by roughly 9.5 percent. 
C) ​rose by 5 percent. 
D) ​fell by 5 percent.

Question 18

If nominal GDP increased from $4,500 billion in 2010 to $5,000 billion in 2011 and the GDP deflator increased from 100 to 105 over the same time period, what would the 2011 real GDP equal expressed in terms of 2010 dollars?

Accepted Answer

A) ​$4,285 billion 
B) ​$4,500 billion 
C) ​$4,725 billion 
D) ​$4,762 billion

Question 19

The net national product (NNP) can be obtained from the GDP by:

Accepted Answer

A) ​subtracting depreciation. 
B) ​subtracting net income of foreigners and depreciation. 
C) ​including the net income of foreigners. 
D) ​subtracting depreciation and indirect business taxes.

Question 20

Which of the following is a problem with using real GDP as a measure of economic well-being?

Accepted Answer

A) ​It fails to measure the value of leisure. 
B) ​It fails to measure the underground economy. 
C) ​It does not factor in externalities. 
D) ​all of the above

Exam 11: The Firm: Production and Costs